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Trust, trustworthiness and the consensus effect: An evolutionary approach

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  • Adriani, Fabrizio
  • Sonderegger, Silvia

Abstract

People often form expectations about others using the lens of their own attitudes (the so-called consensus effect). We study the implications of this for trust and trustworthiness in an evolutionary model where social preferences are endogenous. Trustworthy individuals are more “optimistic” than opportunists and are accordingly less afraid to engage in market-based exchanges, where they may be vulnerable to cheating. Depending on the distribution of social preferences in the population, the material benefits from greater participation may compensate for the costs of being trustworthy. By providing an explicit account of how individuals form and revise their beliefs, we are able to show the existence of a polymorphic equilibrium where both trustworthiness and opportunism coexist in the population. We also analyze the effect of enforcement, distinguishing between its role as deterrence of future misbehavior and as retribution for past misbehavior. We show that enforcement aimed at deterring opportunistic behavior has ambiguous effects on social preferences. It may favor the spreading of trustworthiness (crowding in), but the opposite (crowding out) may also occur. By contrast, crowding out never occur when punishment is merely intended as retribution.

Suggested Citation

  • Adriani, Fabrizio & Sonderegger, Silvia, 2015. "Trust, trustworthiness and the consensus effect: An evolutionary approach," European Economic Review, Elsevier, vol. 77(C), pages 102-116.
  • Handle: RePEc:eee:eecrev:v:77:y:2015:i:c:p:102-116
    DOI: 10.1016/j.euroecorev.2015.04.003
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    Keywords

    Endogenous preferences; Trust; Consensus effect; Deterrence; Retribution; Crowding out;

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • Z1 - Other Special Topics - - Cultural Economics

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